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Monday, 01 Jul 2013
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SEZ Policy - Licence for land grabbing?


The Special Economic Zone (SEZ) policy, launched by the Indian Government in 2005, may soon be a thing of the past as the government is mulling over scraping the SEZ policy.

SEZ Policy_ProjectsToday

The land acquisition process under the SEZ policy led to increased controversies across the country. As a result, most of the approved SEZs never came into reality. It was also alleged that some of the SEZ allottees acquired more land than required while some tried to divert the acquired land to some other uses. All these unwanted development forced the Commerce Ministry to commission a study to Indian Council for Research on International Economic Relations (Icrier) to find if SEZs have met the economic objectives for which the programme was rolled out. The future of the SEZ policy depends on the Committee report which is expected to come in the next six months.


The above decision is also an outcome of the ongoing feud between the Commerce Ministry and the Finance Ministry over the success of the SEZs in India. The Finance Ministry feels that the SEZs have not met the economic goals for which the programme was created.


The Commerce Ministry, as reported, is also not keen to continue the policy as it wants to promote the National Manufacturing and Investment Zones (NMIZ), under the National Manufacturing Policy. The Parliamentary standing committees on both commerce and finance have been opposing the new SEZ policy as it has led to several scams, like the Goa SEZ scam where land was illegally allotted to seven SEZs in 2005.


The Indian embodiment of the Chinese SEZ model led to the SEZ Act of 2005 which was launched for generation of additional economic activity; promotion of exports of goods and services; promotion of investment from domestic and foreign sources; creation of employment opportunities; and development of infrastructure facilities.


As of date, the government has given formal approvals for 588 SEZs. Out of this 386 have been notified and 170 SEZs are operational. The most sought out sectors in the SEZ programme have been IT/ITES, Bio-tech, Multi-Product, Pharma and Textile. State wise, highest number of SEZs are in Andhra Pradesh, Maharashtra, Tamil Nadu, Karnataka and Gujarat.


Exports from SEZs grew by 30 per cent at Rs 4,76,159 crore in 2012-13 and accounted for 29 per cent of the total exports of India. However, the overall exports of the country declined by 2 per cent during the same period.


SEZ Policy_ProjectsToday


Why SEZ policy failed?


Even though the existing SEZs like the Kandla SEZ in Gujarat or the Nokia SEZ in Tamil Nadu have met the expectations, as a whole the new SEZ policy failed to give the expected boost to the Manufacturing sector and lift the country’s exports. The partial success seen in the policy is limited to selected sectors like IT/ITES. Of the 588 formally approved SEZs, 353 SEZs are in the IT/ITES sector.


The general interest of the promoters further diminished following the imposition of the Minimum Alternate Tax (MAT) on both developers and units in the 2011-12 Budget.


In its Foreign Trade Policy 2009-14, unveiled in April 2013, the government announced a number of reform measures to strengthen the SEZ policy. Availability of land being the main issue of the failure of the SEZ projects, the government reduced the land requirement norms for both multi-products and sector specific SEZs by half. These measures have not changed the fortunes of hundreds of SEZ projects which are currently in the nascent stage.


The million dollar question is what will happen to the lands acquired by the state governments, SEZ promoters, if the government decides to scrap the SEZ policy. Will the land be returned to its original owners or will the government allow the SEZ promoters to use it to some other purpose?


Manufacturing Sector Developments


  • The Central Government has given its in-principle approval to set up a natural gas-based fertiliser plant at Ramagundam in Karimnagar district, Andhra Pradesh
  • NMDC plans capex of Rs 2,720 crore for FY14
  • The Central Government, Department of Chemicals & Petrochemicals, is planning to set up six 'plastic parks' during the 12th Plan period
  • KIOCL signed an MoU with APMDC and RINL for setting up beneficiation and pellet plants in Anantapur district of Andhra Pradesh
  • Jayaswal Neco Industries received the green nod from the MoEF, for its integrated steel plant and 100 MW captive power plant at Bilaspur, Chhattisgarh


Infrastructure Sector Developments


  • The Government of Tamil Nadu has decided not to allow GAIL to run its Kochi-Bangalore natural gas pipeline across agricultural lands in the state
  • North Bihar Power Distribution Company has invited bids for three power distribution projects in the state
  • Rajput Group is setting up its news residential project 'Shri Rajneegandha Greens' in Greater Noida, Uttar Pradesh
  • Kochi Metro Rail (KMRL), is likely to commence work on Kochi metro rail project along Kaloor-South stretch by July 2013
  • The Karnataka government is planning to invest around Rs 2,000 crore through Karnataka Industrial Areas Development (KIADB), to acquire land for implementing Phase-II of the Bangalore Metro Rail project


Power Sector Developments


  • Coastal Tamil Nadu Power has received approval from the EAC, coal-based UMPP in Kancheepuram district of Tamil Nadu
  • Work on the 66 MW Loktak Hydel project of NHPC in Manipur is likely to commence by 2014
  • Mytrah Energy has raised approx Rs 1,229.77 crore for its capex plans
  • Thermal Powertech Corporation India (TPCIL), has signed a FSA, with Mahanadi Coalfields for its power plant in Nellore District, Andhra Pradesh
  • Sravanthi Group is planning to shift one of its two 225 MW gas-based power units in Uttarakhand, to Nigeria, Africa

Quote of the week:

P C Nambiar_ProjectsToday

"As regards SEZ, unexpected introduction of MAT and DDT on SEZ developers has created uncertainty in the minds of SEZ developers and slowed down implementation of SEZ. For infrastructure projects of such magnitude, a stable economic and taxation policy is a must."

P.C Nambiar, Chairman, EPCES


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